FERC Okays Two LNG Import Terminals; Providence LNG Fails on Safety Issues

In front of a packed crowd that included some local, state and federal officials Thursday, the last day of Chairman Pat Wood's term, FERC conditionally approved the Weaver's Cove LNG import terminal in Fall River, MA, and the Golden Pass LNG terminal in Sabine Pass, TX, but it rejected the proposed Providence LNG terminal in Providence, RI, saying that it did not meet new federal safety standards.

Despite the safety and security issues surrounding the LNG terminals in the Northeast, Wood indicated that he was happy to approve an LNG terminal in Sabine Pass, near property that he owns in his home town. ExxonMobil's Golden Pass LNG project will provide 2.7 Bcf/d of peak day sendout capacity and 975,000 metric tons of LNG storage. It will include 43-mile and 77-mile pipeline connections to intrastate and interstate pipelines in the area as well as a two-mile pipeline to ExxonMobil's Beaumont refinery. ExxonMobil as a 25-year gas supply agreement with Qatar Petroleum that will begin once the terminal is in service in late 2008 or early 2009.

"This is about 2.8 miles from a property that I own, and I'm very familiar with this site," Wood said. "I appreciate the efforts that staff went through on some of the mitigation issues, particularly during the construction period that were of greatest concern to the residents in that area."

The residents in the Providence, RI, area will be happy to learn that FERC ruled that the Providence LNG project -- a proposed conversion of the existing LNG storage and peak shaving facilities by KeySpan and BG Group -- is not in the public interest because some of its components do not meet the current federal safety standards required for other new LNG terminals.

The $50 million Providence LNG conversion project was designed to provide a peak sendout of 525 MMcf/d of gas with storage capacity for 600,000 metric tons of LNG. KeySpan signed a partnership agreement in October 2003 with BG Group on the project.

"The policy announced today is based upon the need to maintain an effective safety record of the LNG industry, which is due to the array of safety requirements the Commission imposes in authorizing LNG facilities," FERC staff said. The Commission also dismissed Algonquin Gas Transmission's related 1.4 mile 500 MMcf/d pipeline extension to the proposed import facilities.

Commissioner Nora Brownell said it was a "difficult decision to make because we are confronted with what is a new situation in a region that desperately needs it." But she said it was an "appropriate development of the policy that addresses the very real concerns made by the residents in communities and all of the towns" nearby the proposed project.

Brownell said the order will "set some pretty clear standards for future development and expansion." She said the U.S. is known for setting high public interest standards, noting that Japan, Portugal and Spain have terminals of this size and larger in urban areas.

Commissioner Joseph Kelliher called it a "very important order" but expressed concerns about gas supply in New England. He said the region "does need additional LNG import capacity and if that is not provided, gas prices will be higher and there may be supply problems, particularly during the heating seasons.

"But the Commission finds that this project is not in the public interest for safety reasons not for economic reasons, and this order, I think is important because it demonstrates that the Commission applies very high safety standards to new LNG import facilities and it shows our commitment to protect public health and safety."

The Commission also set substantial safety and security conditions on its approval of Hess LNG's Weaver's Cove LNG terminal. FERC staff called the safety and security review process the "most extensive effort ever performed in Commission staff's consideration of an LNG import project." Staff said it would "serve as a blueprint for evaluating" future LNG proposals.

However, the decision to approve the facility was made despite widespread opposition, including from the Rhode Island attorney general, state and federal representatives and the mayor of Fall River, who was in attendance at the Commission meeting.

The $250 million Fall River, MA, LNG project would provide 800 MMcf/d of peak sendout capacity, 400 MMcf/d of baseload supply and 200,000 metric tons of LNG storage. The project would take up 68 of 73 acres at a former petroleum import terminal on the Taunton River, which feeds into Mount Hope Bay and Narragansett Bay about 50 miles south of Boston. Mill River Pipeline LLC would build two short pipelines to the Algonquin Gas Transmission system from the terminal to carry 400,000 Dth/d on average.

FERC staff said it has required Hess LNG to take extra safety precautions in construction and operation of the terminal, including a special vessel transit security plan to be worked out with Coast Guard, an emergency response plan, and other measures. However, staff also noted that the project will have to cross significant state hurdles, including a coastal zone management review, before it can be constructed.

Despite the requirements that the terminal meet numerous improved safety standards, Commissioner Sudeen Kelly dissented, saying that safety and environmental concerns far outweigh the gas supply benefits of the project because there are alternatives available, including two already approved Canadian LNG import terminals and associated pipeline expansion plans by Maritimes & Northeast Pipeline and Tennessee Gas Pipeline, as well as proposed offshore LNG terminals near Gloucester, MA.

"This project would increase the availability of natural gas supply in the New England market. However, I do not believe that this projected need for greater gas supply and delivery infrastructure in the New England area outweighs potential safety, environmental and socioeconomic concerns related to this project. Therefore I do not find that it is consistent with the public interest to site, construct and operate this new LNG import terminal in Fall River, MA."

Kelly cited the safety issues associated with having LNG cargo ships in transit for four hours in the bays and river and docked for another 12 hours at the terminal. She also expressed concerns about the required dredging of about 191 acres of the shipping channel and the widening of river turning basin, which she said would cause the loss of significant flounder spawning habitat. In addition, 980 million gallons of water could be withdrawn each year for ships ballast, which Kelly said would do significant damage the fish population. She also mentioned 16 minute traffic delays on bridges when cargo ships arrive.

Wood said, however, that the "balancing" required by the statute governing FERC's decision "compels the approval of this project... They met the criteria here. We put the mitigation in place" and the project had to be approved.

"We have to give the answers that are the right answers," he said. "I think the Coast Guard is important party in this equation... We are depending the expertise of the agency charged with the safety of transit.

"I don't want to get the Commission back into the business that we were in the 1950s of a government agency picking the winners and the losers. I think identifying projects that meet the high standards that were set under our statutes, [as well as] those of the states" is the right thing to do. However, he noted that Weaver's Cove LNG now faces some pretty steep state hurdles before it can enter service.

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